One for All, All for Profit
Dave Jones knew his people were "smart enough to get clients, keep them happy, and make a profit." He had a problem, however. "A $100,000 project could cost $200,000 to execute," says Jones, president of Human Resources Consulting Group, a division of Aon Consulting, in Detroit. The reason, Jones realized, was that he wasn't paying employees to make a profit.
In 10 years of fast growth, the firm's pretax profit margins rarely dipped below 10%, but there wasn't enough money left for research and development. So Jones decided to stop paying new-account bonuses. Instead, he inaugurated a profit-sharing plan for everyone--including new salespeople.
Each of the company's offices is a profit center, rewarded on its own income statement; office directors can use up to 30% of the profits to reward "special players." Otherwise, bonuses are based on a percentage of salary.
Within two years of starting the new system, Jones was able to distribute $500,000 among his 150 employees. A few of the company's senior consultants--industrial psychologists who doubled as salespeople--favored the old volume-based sales bonuses and left. But most, Jones says, were relieved to share responsibility for sales.
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